National Savings & Investments is to bring back its popular index-linked
savings certificates later this year.

Savers worried about the ravages of inflation have reason to cheer at last – National Savings & Investments' inflation-linked savings bonds are making a comeback.

When the popular bonds, whose returns are linked to the retail prices index (RPI), where taken off the market after oversubscriptions last September, NS&I faced criticism from savers who were struggling to find savings accounts that beat inflation.

That was when the RPI was at 4.6pc. Now, with RPI inflation at its highest rate for 20 years – 5.5pc – savers will welcome the bonds' return.

In a statement on Budget day NS&I said that "subject to market conditions, NS&I expects to be bringing savings certificates back on general sale in 2011/12". It said this would include fixed-rate certificates.

The Government also confirmed that it is to introduce Isas for the under-18s following the abolition of child trust funds (CTFs). All UK-resident children under the age of 18 who do not have a CTF will be eligible for a Junior Isa.

Related Articles

The children's product will be similar to standard Isas and offer both cash and stocks and shares versions. The accounts are expected to be available from autumn this year, and more details are expected in next week's Finance Bill.

John Reeve, the chief executive of Family Investments, urged the Government to keep Junior Isas simple. "Only by offering every family access to a simple savings product that is straightforward enough to be managed without costly financial advice can the Government enable parents to save for their child from day one and look to address the bigger issue of providing young adults with a financial asset," he said.

Meanwhile, all Isa savers will see the annual allowance rise in line with the consumer prices index, rather than the RPI, from April 2012.

Sophisticated investors were also given a fillip as they will benefit from the increase in income tax relief for enterprise investment schemes (EISs). Already exempt from inheritance tax and capital gains tax, investors will now get 30pc income tax relief, increased from 20pc.

Not only is the tax relief increasing, but the amount you can invest is doubling too, from £500,000 to £1m, earning a potential £30,000 in tax relief.

EISs and venture capital trusts (VCTs) will now be able to invest in larger companies – up to a value of £15m, where currently only companies worth £7m or less qualified. This extension may stabilise these traditionally risky investment vehicles.

Ben Yearsley from Hargreaves Lansdown said: "EISs are becoming even more tax-efficient and investing in bigger companies. This should pull more investors in and hopefully make the investments more stable – bigger companies tend to be more cash rich and have better balance sheets."

However, the Chancellor confirmed that anyone planning to invest in the raft of recently launched solar VCTs in the new tax year will not be able to benefit from government renewable-energy incentives on top of their tax relief.

Meanwhile, the cut in corporation tax could, as a presumably unintended benefit, boost returns for UK equity income investors, financial advisers said. Dividends are paid after corporation tax is deducted, so less corporation tax means a bigger pot to be distributed as dividends. From April 5, corporation tax will decrease from 28pc to 26pc, and over the next three years it will decrease further to 23pc.

"Dividends are paid out of after-tax profits; therefore a cut in this tax means more is available for dividend seekers," said Mr Yearsley.

The Chancellor also announced that all tax allowances would in future rise in line with the official Government measure of inflation, the CPI, which is currently 4.4pc and is normally lower than the RPI. This means that the amount exempt from capital gains tax will rise at a slower rate than up to now. The current annual CGT exemption is £10,100 and will be increasing to £10,600 in April.

Mr Yearsley said the effect on investors would be minimal, however. "The difference would only be around £50 a year. I think the rest of the measures cancel out any worries about CGT," he added.